I like to go to a good 400 grit finish. After HT I drop back to 220 grit.
As to when the finish is right, there should be no lower grit marks or scratches, and the surface should be flat and smooth. If there are dips, waves, wiggles, marks, pits, or nicks....get them out before HT. All holes should be drilled and chamfered, too. The edge should be around .030" for most carbon steel, and .010 for stainless. With experience you can go thinner, but start with the edge in these ranges.